The Fair Tax Bites

I recently read an article posted at Tim Baldwin’s Liberty Defense League entitled How To Castrate The IRS, written by Lance Voorhees. The article promotes the so-called “Fair Tax” presently being shilled by radio talking head Neal Boortz and Georgia Congressman John Linder.

The Fair Tax bites. Most people like to say that something they don’t like sucks. But in my personal experience, sucking is good. It’s biting that I don’t like. Sucking on a Tootsie Pop is great, but you could break a tooth biting one. Sucking a refreshing beverage though a straw works well unless you bite the straw. And, in the best example of all…marital relations involving sucking are highly superior to biting.

But I digress.

Here are compelling reasons to reject the Fair Tax.

First: the Fair Tax is a consumption tax…a retail sales tax…that is meant to replace the personal income tax. Nothing wrong with that idea. The tax is levied as a percentage of the amount of a purchase transaction…when you buy something. But they want this sales tax to be a 23% tax! That’s 23% tax independent of any state or local sales tax. Here in Georgia, that would mean 23% plus between 5% and 8%, depending on the county or city your transaction would occur in. In the City of Atlanta, you would face a total tax of 31%! Make a $100 purchase and add another $31 of tax.

Second: The cheerleaders say the Fair Tax is “revenue neutral.” That means the Federal Government would collect roughly as much revenue with the Fair Tax as with the income tax. NOTHING is said about cutting Federal spending one dollar! Shouldn’t THAT be talked about BEFORE changing the method of taxation?

Third: No taxation for a family of four earning below the Federal “poverty threshold” of $29,140. That means that EVERY American would begin receiving a DC check for spending up to the poverty level. Now the entire population would be getting a government check. Even the wealthiest billionaires would get a rebate check for the tax on their first exempt income. But with a 2010 deficit of $2 Trillion, where is this money supposed to come from? Certainly not from Fair Tax revenue. The money will be fiat money, backed by nothing, simply printed up by the Federal Reserve and injected into the economy.

Fourth: Voorhees calls this a “Lifestyle Tax” and an “equitable system.” But what’s equitable about a system that creates an underclass of more Federal welfare recipients? What is equitable about a tax that exempts a certain group of people, while the remaining people subsidize the exempt group? There is NOTHING equitable about the Fair Tax.

Fifth: I don’t see Voorhees dealing with the large-ticket purchases like homes, autos and such. Are we to expect to pay an additional 23% on those purchases? If not, then some exemptions are going to be made. That is the beginning of another tax code, in which some receive benefits at the expense of others.

Sixth and finally: The entire Fair Tax controversy revolves around keeping Washington “as is.” Washington suffers no penalty for its profligacy and criminality. And, as I showed in Texas Secession: A New Nation Without Taxes?, no income tax or any other taxation needs to be collected by Washington from Americans. DC already controls enough wealth to pay off the entire national debt and continue operations without further taxation.

No, people like Boortz and Linder are still big-government lackeys, bowing and scraping before the DC criminals with fawning unworkable suggestions. I’m not sure about Voorhees.

Here’s a suggestion for a WORKABLE change: SECESSION.

Secession returns governance to the states, and ends Federal tyranny. No Federal taxation, no Federal debt, no Federal regulations, no Federal mismanagement. You don’t have to ask permission to secede. You just have to do it.

Don’t you think it would be easier, simpler and more manageable to have your only governmental unit on a local basis instead of in Washington DC? Even though all government is force, local force is more palatable than Federal force.

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19 Responses to The Fair Tax Bites

Ok, so I’ve read the Fair Tax proposal and the supporting legislation.

1: Regardless of the propaganda, it’s not a 23% tax, it’s 30%. An item that costs $100 today would cost $130 after the implementation of the tax. 23% of $130 equals $30 (actually $29.90).

2: The entire population of the USA would end up on the government dole.

3: There is no proposed Constitutional maximum tax rate. So Congress could raise the tax to 50% in short order. Making the new tax in reality 100%. 50% of $200 is $100, so a $100 item before the tax would now be $200.

4: The IRS does not really go away. There still must be some Federal agency to receive the taxes that are collected by the retail business community that is now the non-compensated tax collector for the Fed.

5: The Fair Tax, as proposed, would replace the income tax, the FICA tax, the Medicare tax, all business taxes, all capital gains taxes, the death tax, etc. Assuming Congress doesn’t radically change the proposed bills and the two amendments to the Constitution that have to be passed and ratified.

6: A personal complaint. The hidden Medicare and FICA taxes that I pay through my employer are not turned over to me, they are turned over to my employer. So I am out almost $8000 a year in lost income and my employer is $8000 to the good. That is a windfall for the business community and a direct theft from you and me. Remember, if you work for yourself, you pay both halves of these taxes. Well, if you work for someone else, you still pay both halves of these taxes, it’s just hidden from view to make the taxes more palatable to the average employee, the real taxpayer.

There is more, but I believe I’ve made my point. So Russell Longcore is correct. The Fair Tax does indeed bite. It’s anything but fair.

This is one area that I’m going to have to disagree with you a little bit. I don’t think the fairtax is perfect, my biggest issue with it is the prebate, but I think it is immeasurably better than what we currently have. If the fairtax were passed, the simple fact that it eliminates all taxes and replaces them with one universal consumption tax would cause an immense influx of dollars and foreign investment which have been scared away by the IRS. It would be an instant boom to the economy of the US.

I would encourage you to read the two Fair Tax books that are out. They are short reads and are only about $5 a piece used. Get your information directly from the source, I think you’ll find that the idea is much better than you give it credit for.

Just for example, you have said that the fair tax will raise prices, and your first commenter has said that they lied about the tax rate.

In reality, the Fair tax will lower prices. First of all it will eliminate the 22% price hike inherent in current prices because of business taxes. Secondly you will be getting %100 of your paycheck. Thirdly the sales tax is in fact 30% of the original price of the item but it is still a 23% tax rate. In other words, when you purchase something for $130, you are paying a 23% tax of $30, which is calculated exactly the same way as your income tax.

If you were to take today’s income tax and let’s say you are taxed at 25%, if you make $100,000 then the US Govt gets $25,000 and you get $75,000. This means that the federal government has charged you a 33% tax on your income. Another way of expressing this is:
Fairtax : Income Tax
30% : 33%
23% : 25%

Long story short, make sure you compare apples to apples.

Finally, the Fair Tax also includes state level movements. Here in South Carolina we have a strong Fair Tax coalition and they are pushing for a universal sales tax of 7% in South Carolina and the elimination of business and income taxes. This will help South Carolina become a haven for business investment and create jobs. So while I fully agree that Secession is our only way to prosperity, I also recognize that the Fair Tax movement is having a positive effect on South Carolina at the local level.

Please give those books a read and reconsider the merits of the Fair Tax, thanks!

Mr. Utley-
23% is still confiscatory no matter how you slice it. The Feds don’t have to cut any spending. Finally, there is no reason why a tax should be collected at all. Read the Walter Burien article.

I agree with those points. However I think the fair tax is a step in the right direction. As was pointed out elsewhere, when people see how much tax they pay on every single purchase, they will demand lower spending.

But the idea that taxes and spending have a direct correlation in the USA is inaccurate. As you’ve covered on this site, the USA simply invents money through the federal reserve, then pays down its debt with taxes.

I do think the government has 3 legitimate roles, no matter if we’re talking about the federal government or the state government: Police, Justice, Militia. That’s it. Unfortunately those things require money. I am 100% against government provided services in anything else, because they are at a direct competition with the free market. So I don’t think the government should raise money by providing services that would otherwise be provided in the free market, such as gambling (lotteries) or insurance.

This means that there is going to have to be some sort of tax. I would say that the most fair of all taxation is consumption tax, because it acts as a transaction cost. A just, legitimate government serves to protect your life, your freedom to trade uninhibited, and your freedom to do so without the interference of the use of force. For that, they would have to charge a sales tax.

I know the anarcho-capitalists would strongly disagree with this, but it’s how I see the world. I just can’t see blackwater and competing courts meting out justice in an objective and consistent fashion.

Charles touches on a point that I think needs to be put forward. That is a Constitutional amendment to limit the tax burden of all citizens. By that I mean that we have an amendment that limits the amount of money a person pays to local, state, federal and UN governments. Thus, if we assign 10% as the maximum that can be taken from our income, then that would be the sum of your property tax, sales tax, income tax, etc. That way the politicians can do what they desire and we can live our lives with much less interference.

I agree with Swiftfoxmark. I’d prefer zero tax or an actual voluntary payment based on services, but probably the only way to wake up the plebes is to first show them, up front and in their face, how much their taxes cost them. This scheme would do that.

The most insidious thing about our current system is that most people are clueless as to how much they actually pay.

At the very least, I think everyone should be required to file as if they were self-employed, should this Fair Tax b.s. not pass. That way, if theIRS* is forced to make everyone see their actual taxes paid, more people would wake the F up.

Do you REALLY expect them to give up the income tax? Fine, when they pass the REPEAL of the sixteenth and cut the size of gooferment, then we can consider a “fair tax”. (As a little L libertarian, the only “FAIR” tax is zero!)

I read the Boortz/Linder book shortly after it came out, and was tempted to stop right after I read at the beginning that the Fair Tax was “revenue neutral.”
A “replacement” for income tax? Yeah, right. What’s going to happen is that we will end up with both.
In my view, withholding is the worst thing to happen since the 16th Amendment. If each taxpayer had to write a check for the entire amount on April 15, there would be rioting in the streets in short order.
One thing every American can do right now is to resolve simply to stop voting in elections for federal offices. (Unless, of course, there’s a proven constitutionalist on the ballot. Let’s see… there’s been one of those in my lifetime.)
Can you imagine the impact a one-percent turnout in the next election would have? The creeps in D.C. would be cowering in the corners of their plush offices: “Oh, dear, what are these people up to?”